Financial Planning is the process of meeting your life goals through the proper management of your finances. Life goals can include buying a house, saving for your child's higher education or planning for retirement or similar objectives. Financial Planning is a common-sense disciplined approach to managing your finances to reach life goals. It cannot change your situation overnight; it is a ongoing life long process. Even succession planning is part of broader financial planning agenda.


First step in Financial Planning is understanding your risk capacity. A simple set of questions helps you understand how much risk you are willing to take. Are you a risk taker, a conservative or a moderate. Every investment option carries certain amount of risk. The extent of safety is indicated in each instrument. You should investment in the instrument as per your risk profile.


Financial Planning provides direction and meaning to your financial decisions. It allows you to understand how each financial decision you make affect other areas of your finances. For example, buying a particular investment product might help you pay off your mortgage faster or it might delay your retirement significantly. By viewing each financial decision as part of the whole, you can consider its short and long-term effects on your life goals. You can also adapt more easily to life changes and feel more secure that your goals are on track.


The Financial Planning Process broadly consists of six steps that help you take a 'big picture' look at where you are, currently. Using these six steps, you can work out where you are now, what you may need in the future and what you must do to reach your goals. The process involves gathering relevant financial information, setting life goals, examining your current financial status and coming up with a strategy or plan for how you can meet your goals given your current situation and future plans.


You are the focus of the Financial Planning process. As such, the results you get from working with a Financial Planner are as much your responsibility as they are those of the Planner. To achieve the best results from your Financial Planning engagement, you will need to be prepared to avoid some of the common mistakes by considering the following advice:

Set measurable goals

Set specific targets of what you want to achieve and when you want to achieve results. For example, instead of saying you want to be 'comfortable' when you retire or that you want your children to attend 'good' schools, you need to quantify what 'comfortable' and 'good' mean so that you'll know when you've reached your goals.

Understand the effect of each financial decision

Each financial decision you make can affect several other areas of your life. For example, an investment decision may have tax consequences that are harmful to your estate plans. Or a decision about your child's education may affect when and how you meet your retirement goals. Remember that all of your financial decisions are interrelated.

Re-evaluate your financial situation periodically

Financial Planning is a dynamic process. Your financial goals may change over the years due to changes in your lifestyle or circumstances, such as an inheritance, marriage, birth, house purchase or change of job status. Revisit and revise your Financial Plan as time goes by to reflect these changes so that you stay on track with your long-term goals.

Start planning as early as possible in Life

Don't delay your Financial Planning. People, who save or invest small amounts of money early, and often, tend to do better than those who wait until later in life. Similarly, by developing good Financial Planning habits such as saving, budgeting, investing and regularly reviewing your finances early in life, you will be better prepared to meet life changes and handle emergencies.

Be realistic in your expectations

Financial Planning is a common-sense disciplined approach to managing your finances to reach life goals. It cannot change your situation overnight; it is a lifelong process. Remember that events beyond your control such as inflation or changes in the stock market or interest rates will affect your Financial Planning results.


The following are some of the common mistakes made by people in their approach towards financial planning Not setting measurable goals

  • Making financial decisions without understanding its effect on other financial issues. (in other words, making financial decisions with emotions).
  • Confusing Financial Planning with investing.
  • Thinking that Financial Planning is only for the wealthy.
  • Thinking that financial planning is only when they get older.
  • Thinking that financial planning is the same as retirement planning.
  • Waiting until a money crisis to begin financial planning.
  • Expecting unrealistic returns on investments.
  • Thinking that using a financial planner means losing control.
  • Believing that financial planning is primarily tax planning